Bush hopes that the plan will provide an "effective, robust, and temporary set of incentives that will boost our economy and encourage job creation." The plan contains provisions to eliminate the 10% tax bracket, the lowest tax bracket, to zero percent for one year only, and will provide a tax incentive for businesses to invest in fixed assets such as machinery and equipment. The details of the plan are provided in a fact sheet provided by the White House.
Tax Incentives for Individuals
Individuals would receive an early tax rebate check. The minimum rebate check would be $300 and range up to a maximum of $1,800. The rebate is a refund of the taxes from eliminating the 10% tax bracket. The dollar amounts are determined by an individual's earned income and family size. Unmarried individuals would receive a rebate of up to $600, and married couples a rebate of up to $1,200. Plus, there will be a $300 rebate per child, up to a max of two children.
Tax Incentives for Businesses
Bonus 50% depreciation for asset purchases. Business owners would be able to take a deduction for half the cost of new equipment and other fixed assets.
Increased expensing limits under Section 179. Businesses will be able to deduct up to $250,000 of the cost of new assets, double the $125,000 dollar limit in effect for 2007. Section 179 is a tax provision that gives business owners the option of either deducting the cost of new assets right away, or spreading out the cost over time using depreciation methods. Both the bonus depreciation and the higher Section 179 limits in effect encourages businesses to purchase computers, furniture, machinery, and other assets.
Higher dollar limits for conforming mortgage loans. While not related to taxes, lawmakers agreed that the government-backed mortgage agencies Freddie Mac and Fannie Mae would be able to purchase loans as high as $729,750, up from the current limit of $417,000.
UPDATE: The 2008 Economic Stimulus Act was signed by President Bush on February 12, 2008. You can find more details about the tax rebates here.
- President Bush Discusses the Bipartisan Economic Growth Agreement [White House]
- Fact Sheet: New Growth Package Meets Criteria to Keep Our Economy Healthy [White House]
- Fact Sheet: Bipartisan Economic Stimulus Package [House Speaker Pelosi]
- Senators consider rebates for retirees [AP via Yahoo News]
- Washington Sets $150 Billion Plan To Jolt Economy [WSJ]
- Bush, Lawmakers Say Accord Reached on Stimulus Plan [Bloomberg]
- Strains on the I.R.S. Could Delay Rebate Checks for Months [NYT]
- Recession tax legislation: Does it work? [Don't Mess With Taxes]
- What Would You Do with a Tax Rebate? [About Home Business]
- 2008 Tax Rates [About Taxes]
- What's a Recession? [About Economics]
- How To Depreciate Property [IRS]